Question

Babble, Inc., buys 425 blank cassette tapes per month for use in producing foreign language courseware. The ordering cost is $18.50. Holding cost is $0.10 per cassette per year.

a. How many tapes should Babble order at a time? Babble should order ___tapes at a time. (Enter your response rounded to the nearest whole number)
b. What is the time between orders? The time between ____orders ismonths. (Enter your response rounded to one decimal place)

Answer 1

Babble, Inc. should order 224 cassette tapes at a time with a time between orders of approximately 1.9 months.

Step-by-step explanation:

Babble, Inc. should order 224 tapes at a time. The optimal order quantity can be calculated using the Economic Order Quantity formula:

EOQ = sqrt((2 x demand x ordering cost) / holding cost)

Given that the demand is 425 tapes per month, the ordering cost is $18.50, and the holding cost is $0.10 per cassette per year, we can plug in these values to calculate the EOQ:

EOQ = sqrt((2 x 425 x 18.50) / (0.10 x 12)) = 223.6

Rounding to the nearest whole number, Babble should order 224 tapes at a time.

The time between orders can be calculated by dividing the demand by the EOQ:

Time between orders = demand / EOQ = 425 / 224 = 1.897

Rounding to one decimal place, the time between orders is approximately 1.9 months.